‘Operation Economic Outcast’ is perhaps the last missile US President Donald Trump has in his arsenal to fire at Iran
By attempting to strangle Iran economically and threatening nations that continue to trade with Tehran, US President Donald Trump has willy-nilly expanded the canvas of the war that he, along with Israel, launched six months ago.
The attempt at economic strangulation using what Trump calls ‘Operation Economic Outcast’ is clearly an expression of frustration at not being able to extract concessions from Tehran. The US (and Israel) had hoped that intense military strikes would be an “awe and shock” moment for Iran, which would then capitulate, crying “Uncle”.
Iran resists US pressure
Instead, Trump and his friend, Israeli Prime Minister Benjamin Netanyahu, found to their shock that Iran was no pushover. Making it worse for them, Tehran resisted in an unprecedented way, squeezing the global economy by asphyxiating the Strait of Hormuz. This eventually forced Washington and Tel Aviv to back off from their military strikes.
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In superpower diplomacy, the general approach is to first try to negotiate with a country. If that fails, try applying economic sanctions. In case that doesn’t work, then go for the military option. Trump, true to his reputation for being unpredictable and illogical, jumped to the military option in the middle of negotiations. Having failed, he is now trying out the economic squeeze on Iran.
Having initiated the war for the second time, after the first 12-day phase of military strikes in June last year, the Trump administration could not stop the fight without fulfilling its stated aims as it would tantamount to admitting defeat.
Trump then made a lofty claim about having decimated Iran’s military capabilities before initiating negotiations as a way to end the war. So thoroughly had the US underestimated Iran it could not stomach Tehran’s resistance during the negotiations as well.
Trump’s Iran strategy falters
From all indications, Trump’s team attempted to arm-twist the Iranian negotiators into agreeing to give up its stock of enriched uranium and declare an end to its nuclear project. Iran’s President Masoud Pezeshkian made it clear his country would not allow itself to be arm-twisted into agreeing to a deal.
After another round of strikes, Trump eventually announced the US would be stopping its attack and try negotiating. That has not worked. A mid-term election in November is looming for Trump and he has to sell his Iranian adventure to the electorate, if he has to win voter approval.
‘Operation Economic Outcast’ is perhaps the last missile Trump has in his arsenal to fire at Iran. A sanction of this nature opens itself to interpretation. Trump can end the war and claim he has economically strangulated Iran, and hope US voters buy his story.
In reality, for Trump to succeed in his “economic warfare”, the US requires the cooperation of nations around the world, which are in no way linked to the war. Among these, the one that can puncture Trump’s plan is China.
China refuses to bend to Trump
The Xi Jinping government has already dismissed the US’s move to throttle Iran economically, and has indicated it is in no mood to oblige Trump.
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The key question is whether Trump has the stomach to take action against China if it continues to trade with Iran. Beijing will continue, there’s little doubt. In Trump’s second term, the US backed off when China threatened to retaliate against reciprocal tariffs.
The US’s move against Iran is also coming in the backdrop of Xi’s scheduled September 24 visit to Washington. Though both countries have not specified any particular agenda, the visit is deemed important by the Trump administration as it is expected to stabilise their mutual relationship and sign on areas of mutual interest, including AI.
Xi’s proposed visit comes as a sequel to Trump’s visit this May to China where the US president appeared subdued and keen on not antagonising the Xi government. At the end of that visit, neither side shared anything of note publicly with the media, and the outcome largely remained confined to speculation.
India’s Iran ties under strain
Though India is a much smaller player compared to China, New Delhi could have played spoilsport to the US, by continuing to trade with Iran. But past experiences and recent moves have shown that the Modi government has generally played along with the US, rarely defying Washington.
Further Trump has shown that while he is hesitant to act against China, as far as India is concerned, he has gone ahead and carried out threats including imposing penalties and reciprocal tariffs. For India, the only leverage it has vis-a-vis the US is the impending trade deal which Trump is keen to sign with it. But chances are the Modi government will not want to take chances, given Trump’s temperament.
Already, India has sharply reduced imports from Iran -- $13.5 billion in FY 2019 to around $375 million now. It has almost stopped purchase of Iranian oil since the war commenced six months ago other than a brief period when it bought the crude worth around $700 million following US waiver of sanctions.
New Delhi is in a difficult position given that Iran is not likely to forget or forgive those nations that stopped trading with it under US pressure. Officials in Tehran have already indicated as much. Once the situation eases and normalcy is restored, Iran may well recalibrate its relationship with New Delhi in ways that may be unpalatable.
Iran braces for economic pressure
Meanwhile, the US’s ‘Operation Economic Outcast’ could well turn out to be an exercise in bravado if, besides China, countries that have traditionally helped Iran continue to do so. But one serious setback for Tehran is the UAE’s recent decision to suspend trade with it.
Among other neighbours, Iran used access through the UAE to beat back US sanctions. That avenue is now closed. That leaves Iran with Qatar, Oman and the rest of the Gulf Cooperation Countries other than Saudi Arabia to move its goods through. Russia too is expected to come to Iran’s aid, as in the past, but its efficacy is in doubt given the war it is fighting with Ukraine.
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It’s not that Trump’s intense sanctions will leave Iran unaffected. Though Tehran over the last 50 years, since the revolution, has devised various ways to subvert the US’s sanctions imposed in phases over time it does affect the country’s economy. This time around, reports quoting US officials say they plan to target Iran’s aviation, digital assets, gold, technology and shipping sectors.
But, as Iran’s senior officials point out, it is a matter of survival for their country, and they will do everything they can to thwart Trump’s economic squeeze, the latest threatening to be the most debilitating.
Trump’s Iran threats lose credibility
Trump, in the past, has made bombastic claims – like having obliterated Iran’s nuclear program and decimated its military. These claims have not sustained, in the face of Iranian resistance.
The announcement of the latest economic sanctions too sounded similar. The tepid response of international markets to the US threats indicate Trump’s loss of credibility.
Though, for a start, some companies including four Indian ones have been sanctioned, that does not seem to have convinced anyone of Trump’s seriousness of purpose. He had in the past threatened to bomb Iran out of existence, end the (Persian) civilisation, send it back to the stone age etc. Eventually he backtracked, and nothing came of these threats.
Whether Trump’s latest economic missile meets a similar fate or succeeds where other tactics failed will be known soon, as the world prepares to witness the latest episode of this open-ended war.
